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Market Review: Bank of Canada Overnight Rate

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Market Review: Bank of Canada Overnight Rate

Market Review: Bank of Canada Overnight Rate

Economic calendar (highest volatility): 16th April– 20th April 2018:

Timezone: (GMT -5:00) Eastern Time (U.S & Canada), Bogota, Lima


In the previous week, the United States (U.S) March 2018 Core Consumer Price Index (CPI) was released and remained largely unchanged at 2.1%. This instantly led to further weakness for the U.S Dollar (USD) as reflected by the USD Index (DXY) which saw it dip back to the 89 level. This adds consistency to our view that there is an apparent ‘buy on rumour sell on fact’ play for the USD, suggesting that ‘protectionist’ and 'geopolitical' issues are of a larger concern to the market compared to Interest Rate hike optimism. Formerly, U.S President Trump signed a memorandum imposing wide-ranging tariffs of up to U.S$60 billion on China; following previously imposed tariffs on steel and aluminium imports. China has since retaliated with the introduction of it's own tariffs on imports on 128 U.S products. Last week, U.S President Trump further rattled markets by announcing the possibility of an additional U.S$100 billion worth of tariffs to be imposed against China. The team here at FintechFX will continue to monitor these developments and further analyze the potential of  a heavier 'trade war' taking place and the implications it would bring on currencies. 

In regards to this week, the team here at FintechFX views for a slight shift-away from our usual USD related rhetoric as we opine the most currency trading volatility to be mainly driven by the Canadian Dollar (CAD). This week, Canada will be deciding on it's Overnight Rate in which the team of us here at FintechFX views is expected to bring about the most trading volatility. Following this release, Canada is also set to release it's March 2018 CPI data and it's February 2018 Core Retail Sales data ranking it as the currency major which will see the most issues of potentially high volatile releases for the week. In addition to this, the U.S and United Kingdom (U.K) will also be releasing it's March 2018 Core Retail Sales data. 


The team here at FintechFX views that coupled with good fundamental data, there is chance for a continuing  sell-down to take place following the move of USD/CAD below a key resistance level. This week, a series of Canadian related data will come under scrutiny in which a favoring result, will largely benefit the CAD.

The GBP/USD can easily be crowned as one of 2018's star performer; the pair is seen to have recouped much of it's post-Brexit losses as indicated in the strong uptrend visible in the chart below. The Bank of England (BoE) has cautioned that akin to the U.S, the BoE may also raise Interest Rates faster than expected. This statement sparked some optimism for GBP/USD prices as this message was reaffirmed during the BoE Interest Rate Decision meeting recently; the markets are now pricing in for a rate hike to take place sometime this May 2018. The team here at FintechFX views that at least the "buy on rumour" move seems to be holding strong for now as indicated by the well validated support line as shown in the chart below. Nonetheless as also indicated in the chart below, such market optimism is now faced by a multi-year resistance level. 


Source (Charts):

Source (Economic Calendar):

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Economic Calendar by TradingView

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